ECONOMICS
BUSINESS CYCLES
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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increases
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decreases
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stays the same
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nothing
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Detailed explanation-1: -The downswing of the business cycle towards a trough is called an economic contraction. It is associated with: decrease in production/output • increase in unemployment • decrease in wages • decrease in consumer spending.
Detailed explanation-2: -Expansion is a period of economic growth: GDP increases, unemployment declines, and prices rise. The peak marks the end of an expansion and the beginning of the next stage, the contraction. During the contraction, GDP decreases, unemployment rises, and prices remain steady or fall.
Detailed explanation-3: -Definition and Examples of an Economic Contraction An economic contraction happens when domestic output, such as GDP decreases. It leads to a decrease in other areas, such as individual income, production, and sales. Unemployment rates may increase.
Detailed explanation-4: -period of economic growth; unemployment is decreasing and workers are earning high wages. What does contraction during the business cycle show? The economy is shrinking while unemployment is increasing.